Government bond risk premiums in the EU revisited: The impact of the financial crisis

Juergen von Hagen, Ludger Schuknecht and Guido Wolswijk

European Journal of Political Economy, 2011, vol. 27, issue 1, 36-43

Abstract: This article looks at US$ and DM/Euro-denominated government bond spreads relative to US and German benchmark bonds before and after the start of the current financial crisis. The study finds, first, that bond yield spreads during the crisis can largely be explained on the basis of the same variables as before the crisis. Second, markets penalise fiscal imbalances much more strongly after the Lehman default in September 2008 than before. There is also a significant increase in the spread on non-benchmark bonds due to higher general risk aversion, and German bonds obtained a safe-haven investment status similar to that of the US which they did not have before the crisis. These findings underpin the need for achieving sound fiscal positions in good times and complying with the Stability and Growth Pact.

Keywords: Sovereign; risk; premiums; Bond; markets; Financial; crisis (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (185)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0176-2680(10)00050-9
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Government bond risk premiums in the EU revisited: the impact of the financial crisis (2010)
Working Paper: Government Bond Risk Premiums in the EU revisited: The Impact of the Financial Crisis (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:27:y:2011:i:1:p:36-43

Access Statistics for this article

European Journal of Political Economy is currently edited by J. De Haan, A. L. Hillman and H. W. Ursprung

More articles in European Journal of Political Economy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().